Energy Credits for Individuals

Expanded energy credits for the 2023 tax year are REALLY expanded and better than they have been in many years (or ever) from the Inflation Reduction Act. There are credits and deductions for individuals and businesses. We will only cover credits for personal use in this article.

Credits for individuals are in two categories, home energy credits and clean vehicle credits. Home energy credits are my favorite, as they apply to the largest amount of individuals and are the most likely credits you will benefit from.

In short, bring all of your receipts for energy-efficient home improvements to your tax appointment and we will make sure you get the highest deduction available!

Home energy credits

You can claim the Energy Efficient Home Improvement Credit and/or the Residential Clean Energy Credit for the year when you make qualifying improvements to your residence. You can claim the Energy Efficient Home Improvement Credit and/or the Residential Clean Energy Credit for the year when you make qualifying improvements to your residence. The Energy Efficient Home Improvement Credits only qualify for improvements to existing homes, and the Residential Clean Energy Credits qualify for existing homes and new construction.

The credits are only available for improvements made to a property used as your residence.

You can claim the credits year after year (instead of lifetime limits as before), with an annual limit on most credits. The limits are somewhat complicated, and if you prefer visuals, a graph is available HERE.

These credits are available annually through 2032.

Energy Efficient Home Improvement Credit

These expenses may qualify if they meet the energy efficiency requirements detailed on

I have put the credits in order from smallest to greatest credit amount. The following improvements have a combined annual limit of $1,200 and no lifetime limit,

  • Home energy audit from a certified professional: 30% of cost up to $150.
  • Exterior doors: 30% of cost, up to $500 (limited to $250 each)
  • The following improvements have a 30% credit up to an annual limit of $600.
  • Windows and skylights
  • Electric panel or circuit upgrades
  • Central air conditioners, heating equipment, and water heaters (all non-heat pumps)
  • Insulation materials: 30% of cost up to $1,200

The following credits are in addition to the $1,200 annual limit, up to a total of $3,200 per year.

  • Home electric vehicle charger: credit of 30% of cost up to $1,000.
  • Heat pumps, heat pump water heaters, and biomass stoves: 30% of cost up to $2,000.

Residential Clean Energy Credit

These credits have the greatest potential to minimize your taxes because they have no annual maximum or lifetime limit. These credits are non-refundable but they can be carried forward to future tax years.

  • Solar, wind, and geothermal power generation
  • Solar water heaters
  • Fuel cells
  • Battery storage

Clean Vehicle Tax Credits

Buying a NEW vehicle for personal use

The credit is up to $7,500 if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.

The credit is nonrefundable and does not carry forward.

When you purchase the vehicle, the dealership is required to inform you of the qualifications for the credits and how much they qualify for. The sale only qualifies if they report your name and tax ID to the IRS at the time of sale.

The vehicle’s MSRP cannot exceed $80k for vans, pickups, and SUVs or $55k for other vehicles.

To qualify you must:

  • Buy it for your own use, not for resale
  • Use it primarily in the US

Your modified adjusted gross income must not exceed

  • $300k for married couples filing jointly
  • $225k for heads of household
  • $150k for all other filers

Buying a USED vehicle for personal use

Beginning January 1, 2023, if you buy a qualified used electric vehicle (EV) or fuel cell vehicle (FCV) from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit of 30% of the sale price up to $4,000.

The credit is nonrefundable and does not carry forward.

At the time of sale, a seller must give you information about your vehicle’s qualifications. Sellers must also register online and report the same information to the IRS. If they don’t, your vehicle won’t be eligible for the credit.

To qualify, you must:

  • Be an individual who bought the vehicle for use and not for resale
  • Not be the original owner
  • Not be claimed as a dependent on another person’s tax return
  • Not have claimed another used clean vehicle credit in the 3 years before the purchase date

In addition, your modified adjusted gross income (AGI) may not exceed:

  • $150,000 for married filing jointly or a surviving spouse
  • $112,500 for heads of households
  • $75,000 for all other filers

You can use your modified AGI from the year you took delivery of the vehicle or the year before, whichever is less.  If your income is below the threshold for 1 of the two years, you can claim the credit.

Qualified Used Vehicles and Sales

To qualify, a vehicle must meet all of these requirements:

  • Have a sale price of $25,000 or less. The sale price includes all dealer-imposed costs or fees not required by law. It doesn’t include costs or fees required by law, such as taxes or title and registration fees.
  • Have a model year at least 2 years earlier than the calendar year when you buy it. For example, a vehicle purchased in 2023 would need a model year of 2021 or older.
  • Not have already been transferred after August 16, 2022, to a qualified buyer.
  • Have a gross vehicle weight rating of less than 14,000 pounds
  • Be an eligible FCV or plug-in EV with a battery capacity of at least 7 kilowatt hours
  • Be for use primarily in the United States

To see if a vehicle is eligible for the used clean vehicle credit, go HERE.